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Better Marijuana Stock: Tilray vs. Green Thumb Industries

Keith Speights, The Motley Fool

If you had bought shares of Tilray (NASDAQ: TLRY) right after its initial public offering (IPO) last year and held on to your shares, you'd be sitting atop a nice gain of more than 120%. On the other hand, if you had invested in Green Thumb Industries (NASDAQOTH: GTBIF) around one month earlier when it began publicly trading, your return would be close to 50%. Not bad at all -- but a lot less impressive than Tilray's performance.

So far in 2019, though, Green Thumb Industries (GTI) has been the bigger winner. The stock is up 34%, while Tilray's share price has dropped 29% year to date. Which of these two marijuana stocks is the better pick now? Here's how Tilray and GTI compare. 

$100 bills and cannabis leaves

Image source: Getty Images.

The case for Tilray

Tilray ranks behind many of the top Canadian cannabis producers in terms of production capacity. It's not in the top tier with respect to cannabis sales, either. But there are several reasons why Tilray deserves serious consideration by investors.

One key plus for Tilray is its strong presence in the international medical cannabis market. The company distributes its medical cannabis products to 12 countries and was the first to ship medical cannabis to four continents. In its last quarter, Tilray's international medical cannabis sales soared 321% year over year and contributed nearly 8% of the company's total revenue.

Tilray also claims a top spot in the North American hemp market, thanks to a recent acquisition. In February, Tilray announced that it was buying Manitoba Harvest, the world's largest hemp foods company. The deal immediately bolstered Tilray's sales and gives the company its first access into the U.S.

But probably the strongest argument for buying Tilray stock is the company's partnerships. Tilray teamed up with big pharma company Novartis to market medical cannabis products in Canada, with the relationship later expanding to a global reach. Novartis' name recognition should especially help Tilray in gaining support from physicians and pharmacies in Europe.

Tilray and giant beer-maker Anheuser-Busch InBev are working together to develop nonalcoholic cannabis-infused beverages for the Canadian market that's expected to open for business later this year. It's possible that the two companies could eventually partner in other markets, as well.

Earlier this year, Tilray signed another partnership deal with a large company, Authentic Brands Group (ABG). Tilray and ABG plan to market and distribute consumer cannabis-infused products. ABG owns a broad lineup of consumer brands. Look for ABG products such as Nine West foot creams and Spyder muscle rubs infused with CBD from Tilray on shelves perhaps as soon as the end of 2019.

Tilray CEO Brendan Kennedy predicts that in the future, three or perhaps four companies will split 80% of the global cannabis market. He thinks that Tilray will be one of those companies.

The case for Green Thumb Industries

Green Thumb Industries believes that the U.S. cannabis market will increase by a compound annual growth rate (CAGR) of 20% over the next 10 years. That translates to a market size of $80 billion. And GTI plans to be one of the big winners from this sizzling growth.

The company currently operates in 12 U.S. states. GTI owns six cannabis brands and runs 23 retail cannabis stores and 13 production facilities. But these numbers are likely to grow in the near future.

GTI plans on opening between 15 and 20 new stores this year and claims 89 retail licenses, in total. And with 33 U.S. states with legal medical cannabis markets and 11 with legal recreational pot markets, GTI has plenty of room to grow.

Actually, though, GTI doesn't need to move into additional states to generate strong growth. It operates in the largest market of all, California, but the legal recreational pot market is still in its early stages. GTI's home state of Illinois recently became the 11th state to legalize recreational marijuana, with the market scheduled to launch in 2020.

Of course, GTI is likely to expand into new states. And more states are likely to legalize medical cannabis and/or recreational marijuana.

Even if more states don't legalize cannabis, GTI has another way to grow. Thanks to the passage of the 2018 Farm Bill, hemp is legal in the U.S. GTI's Beboe beauty-care products are infused with hemp-based CBD and are being distributed by major retailers, including Barneys New York and Neiman Marcus.

Better marijuana stock

Both Tilray and Green Thumb Industries should have tremendous growth prospects. But if I had to pick only one of these stocks, it would be GTI.

Tilray's market cap is more than twice the size of GTI. However, GTI made significantly higher revenue in its last quarter. And while Tilray hopes to one day be able to compete in the world's biggest marijuana market, GTI is already a leader in the U.S. 

GTI's valuation is currently being held back as a result of marijuana remaining illegal at the federal level in the U.S. But sooner or later, federal laws will change, and GTI's true value will be unlocked. The stock could be a huge winner over the long run.

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Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends Anheuser-Busch InBev NV. The Motley Fool has a disclosure policy.